Housing dodges worst of global wreck: Sydney Morning Herald
- Thread starter mam544
- Start date
Uh.
Theres nothing *special* about negative gearing. It is a fundamental principle of taxation in Western countries that you only tax profits - you do not tax gross revenue.
Profit is what is left over after deducting expenses. McDonalds pays tax on their profits, not on the dollar value of the hamburgers they sell.
Interest is a normal business expense, just like salaries and pickles. It is consistent with taxation principles that the so-called negative gearing be permitted, because we as IP owners are running a business.
It would be highly inconsistent with Western taxation principles to disallow the deduction of a certain type of expense (interest expense) in specific circumstances (ownership by an individual) ie negative gearing.
Dont think its special - because it isnt. What *is* special is permitting interest on PPORs to be deducted in the USA. Because expenditure for personal purposes (shelter, food, clothing) is normally not deductible because it is not incurred for the purpose of generating an income stream.
Slightly off topic, but with the poor outlook ahead for the sharemarket and the possibility of Australia heading into a recession won't the RBA be forced to act sooner rather than later by cutting interest rates in an attempt to 'rescue' the economy? In the process this will be the start of the next property boom.
(I'm no guru so expect to be shot down with these comments.)
Hi Ebbie
Nobody knows what would happen. We can only guess that RBA having a helicopter view will be quite alarm if banks continue to reduce credit in the economy with its independent interest increases. Naturally, RBA will be concerned to make sure that the GDP is reasonable to avoid the economy sliding into a recession. So far the unemployment rate has not been helpful but non commodities GDP may show something awkward. I certainly hope so as the small business owners I know are feeling the squeeze.
The first decrease of IR from RBA will probably help the banks prop more of the small businesses and expand a bit of business. It will require at least 2 IR reductions from the RBA I think for effect to start having a meaningful impact on residential properties. OK all these are my guesses, alright and I have been looking for an IR reduction later this year.
The alternative is if Christmas comes and goes by without an RBA rate reduction to stimulate economic activities, I think the impact on employment losses in the retail/hospitality sectors will then be eye-catching. I expect the govt to look really bad and RBA will have no alternative but to reduce IR by Jan-Mar 2009. OK all guesses, please indulge me!
Seeing as we are onto guessing Illl have some fun
My guess is June CPI figure inches up to 4.4% (up from 4.2%). There is a big fuss in the media about how it is all imported inflation due to high cost of petrol and increased costs in housing (which were caused by IR rises anyway). RBA does nothing in August.
September CPI goes to 4.5%. People talk about inflation "stabilising" and "lower than market expectations". RBA does nothing in October. Banks hold IRs steady.
December CPI BIG JUMP. 5.1%. Markets crap themselves. RBA raises rates 25 basis points. Banks add 35 basis points on top of RBA rise. Outer ring starts to look shaky. Inner ring holds steady.
After that I think it will sit there and hold for awhile.
My guess is June CPI figure inches up to 4.4% (up from 4.2%). There is a big fuss in the media about how it is all imported inflation due to high cost of petrol and increased costs in housing (which were caused by IR rises anyway). RBA does nothing in August.
September CPI goes to 4.5%. People talk about inflation "stabilising" and "lower than market expectations". RBA does nothing in October. Banks hold IRs steady.
December CPI BIG JUMP. 5.1%. Markets crap themselves. RBA raises rates 25 basis points. Banks add 35 basis points on top of RBA rise. Outer ring starts to look shaky. Inner ring holds steady.
After that I think it will sit there and hold for awhile.
hi boomtown.
heres mine and lets see who gets the closer.
no movement from the rba until jan.
the bank will add a bit here and therebut no major movements.
feb the rba drops 1/2 to 3/4 per cent.
and about march to april we see a opening up of lending not from the banks here but funding comming in from overseas and banks here matching it.
lets see if my guesses are right
heres mine and lets see who gets the closer.
no movement from the rba until jan.
the bank will add a bit here and therebut no major movements.
feb the rba drops 1/2 to 3/4 per cent.
and about march to april we see a opening up of lending not from the banks here but funding comming in from overseas and banks here matching it.
lets see if my guesses are right
Then you have made a bad investment. That's the risk of investing with that strategy.
Anyone who is neg gearing simply for the tax benefits is not planning to maximise the investment.
Why would anyone willingly give the govt $1.00 to get back $.50?
But, over the long term there will be some cap gains though, and always will be, and always has been, so don't expect the market to halve just yet HG.
**droool***mmmm........0.75% drop in rates....*droool*
(Homer style!!!)
Who was it that dropped their rates - or was it a nice dream?
"Pent up demand"
What is that exactly? Tyre kicking and wishing?
I'm sure Ferrari isnt getting all excited about the "pent up demand" for their cars.
There is demand or there isn't.
You may predict that demad will rise in the future as interest rates decrease.
You may also predict that demand will fall as interest rates drop. That latter may be the case if falling interest rates are belatedly trying to prop up a failing economy.
What is that exactly? Tyre kicking and wishing?
I'm sure Ferrari isnt getting all excited about the "pent up demand" for their cars.
There is demand or there isn't.
You may predict that demad will rise in the future as interest rates decrease.
You may also predict that demand will fall as interest rates drop. That latter may be the case if falling interest rates are belatedly trying to prop up a failing economy.
Seeing as we are onto guessing Illl have some fun
My guess is June CPI figure inches up to 4.4% (up from 4.2%). There is a big fuss in the media about how it is all imported inflation due to high cost of petrol and increased costs in housing (which were caused by IR rises anyway). RBA does nothing in August.
September CPI goes to 4.5%. People talk about inflation "stabilising" and "lower than market expectations". RBA does nothing in October. Banks hold IRs steady.
December CPI BIG JUMP. 5.1%. Markets crap themselves. RBA raises rates 25 basis points. Banks add 35 basis points on top of RBA rise. Outer ring starts to look shaky. Inner ring holds steady.
After that I think it will sit there and hold for awhile.
I'll have a go..
RBA cuts 25 basis pts in Nov.. banks follow with .14% cut..
RBA cuts by another 25 basis pts in Dec becuase banks didn't pass on full Nov cut.. banks follow with .2% cut..
